Over the past five years, several studies have shown that visual and attentional processing is altered near the observers' hands. One explanation for these effects suggests that placing the hands near visual stimuli increases the contribution of the magnocellular (M) pathway and decreases the contribution of the parvocellular (P) pathway (Gozli, West, & Pratt, 2012). Given the role of the M-pathway in integrating information across space, the current study examines if hand position is also capable of influencing perceptual grouping. To accomplish this, we used a modified version of the Kramer and Jacobson (1991) task in which target-flanker gestalt grouping and target-flanker distance are manipulated. For this experiment, participants judged whether a vertical target line presented at fixation was dotted or dashed while they had their hands near (on the monitor) or far (on the keyboard) from the stimuli. The critical manipulation was that the target line was flanked by two dotted or dashed lines, grouped into the same or separate objects as the target line, appearing at varying distance on the left and right of the target line. It was previously found when target and flankers belong to separate objects there is a reduced flanker congruency effect. This effect was replicated in the far-hands condition, but in the near-hands condition flankers belonging to separate objects continued to cause a congruency effect. These results are consistent with the visual pathway account: in far-hand space object-based processing (P pathway) dominates performance while in near-hand space location-based processing (M pathway) is the main driver of performance.